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A proposed cost-saving device has an installed cost of $648,000. The device will be used in a five-year project but is classified as three-year MACRS (MACRS Table) property for tax purposes. The required initial net working capital investment is $45,500, the marginal tax rate is 34 percent, and the project discount rate is 13 percent. The device has an estimated Year 5 salvage value of $70,500.
What level of pretax cost savings do we require for this project to be profitable? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
On January 2d, 2014, Microsoft expects to ship 1,000,000 new X-Boxes from its US plant, which it will sell through EU dealers on 270-day terms at 250 Euro each. So Microsoft will receive payment from its dealers on September 28th, 2014.
Describe how Net present value is calculated and how the information this measure provides about a sequence of cash flows. What is the NPV criterion rule and why is NPV considered to be a superior method of evaluating the cash flows from a project? S..
Suppose that the current one-year rate (one-year spot rate) and expected one-year Tbill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: Using the unbiased expectations theory, what is the current (long-ter..
Consider a bond paying a coupon rate of 8.00% per year semiannually when the market interest rate is only 3.2% per half-year. The bond has five years until maturity. Find the bond's price today and ten months from now after the next coupon is paid. W..
Loan Payments You wish to buy a $25,000 car. The dealer offers you a 4-year loan with a 9 percent APR. What are the monthly payments? How would the payment differ if you paid interest only? What would the consequences of such a decision be?
As chief financial officer at Apocalyptic Fitness Supply, you track costs and revenue for the daily manufacturing process for your company’s top-selling product, the Spine Crusher unstoppable elliptical trainer. Determine the cost and revenue equatio..
A corporation has $5,000,000 of 10 percent bonds and $3,000,000 of 12 percent preferred stock outstanding. The firm’s financial breakeven (assuming a 40 percent tax rate) is
Wayne's Inc.'s outstanding common stock is currently selling in the market for $37. Dividends of $3.43 per share were paid last year, return on equity is 25 perfect, and its retention rate is 28 percent. a. What is the value of the stock to you, give..
Explain how the design of a CMO supposedly helps to manage prepayment risk for investors. What is a tranche?
How do credit managers manage the risks related to extending trade credit? Aside from late or non-payment, what other risks do you see with trade credit?
Five years ago, Northwest Water (NWW) issued $40,000,000 face value of 30-year bonds carrying an 8% (annual payment) coupon. NWW is now considering refunding these bonds. It has been amortizing $4 million of floatation costs on these bonds over their..
A bank can invest in 2 portfolios. Each requires $100 million to be raised either through debt or equity. One portfolio contains only safe assets and pays a certain gross return of $118 million. Which portfolio makes the most sense from society's sta..
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